28 January 2014

There is nothing about Barack Obama's speech that demonstrated the knowledge - much less the embrace - of any technology advances from the last half century.

The State of the Union (SOTU) is still delivered by one man who talks into the camera. Recent advances (recent as in during the last few decades) include special guests in the balcony. There is no use of simple innovations that even kindergarten teachers use: little things like graphs and video.

These speeches range from topics as varied as war and foreign policy to theories about what makes economies prosper and what is fair. All explored and explained by words.

It wouldn't take much to innovate the SOTU. Graphs would do it. Documentary footage of real Americans rather than their presence in the balcony. Videos that showed Americans in battle or in unemployment lines. Graphs and numbers could help to illustrate trends, forecasts, and issues. Photos, and videos could humanize these.

The federal budget last year was trillions of dollars. The money it would cost to create a SOTU that better used an hour of millions of Americans' time would be a rounding error in this budget. It's absurd that any president intent on actually communicating would not avail themselves of technology and tools regularly used by millions of their citizens.

24 January 2014

Once people have a voice, they want to be heard. And social media has changed things from the TV model in which one broadcasts to many into an Internet model in which many broadcast to many, not only wanting to be heard but wanting to have an influence. That makes for a different kind of politics and we're seeing it in Ukrainian protests.

Nayyem, an Afghan-Ukrainian, is credited with jump starting the protest movement by sending out Facebook appeals for protesters on Nov. 21, the day the government backed away from signing the pact with the European Union. That evening, about 1,500 people responded to his appeal. [The next day, a protest that was expected to attract 10,000 attracted 1 million.]Nayyem says he chose Facebook, over its Russia-based rivals, Vkontakte and Odnoklassniki, because Facebook in Ukraine is used by the elite, the opinion makers.Facebook, he said, is democratic because it allows for instant, horizontal communication among people who trust each other and who consider themselves social equals. By contrast, television is better suited for the kind of Soviet-style, top down, vertical communication that politicians of Yanukovych’s generation are comfortable with.

23 January 2014

Average home equity went up about 84% last year, which would increase wealth in the average household by about 25%. Additionally, last year's stock market gains drove up household wealth by another 2 to 6%. Combined, rises in home and stock prices drove up household wealth by about 30%.

This increase in household wealth could mean annualized GDP growth in the first half of this year that is nearly double what it was in the first half of last year, which is to say about 4 to 5%.

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The numbers, the math, the thinking and the sources below.

So, in December of 2012, the average household had $26,843 in home equity. ($174,434 - $147,591)
By December 2013, the average household had $49,509 in home equity. ($197,100 - 147,591)
The increase in equity was $22,667, or 84.4%.

Formula for calculating impact on household wealth is
% of Household wealth represented by the asset X % by which its value rose
For homes, that's 30% X 84% = 25%
For stocks that's 7 to 22% X 26% = 2% to 6%.
25% for home prices + 2% to 6% for stocks = 27% to 31%, or about 30% increase in household wealth.

Per Greenspan's calculation, this increase of 30% in household wealth would mean an increase of 3.9 percentage points for GDP growth. I'll cut that in half, discounting it "for other factors" to arrive at a number between 4 and 5 percent in contrast to the between 2 and 3 percent growth in the first half of 2013.

You may quibble in the comments. In any case, it's good news for the economy that so many households are no longer under water and others have gained a great deal of lost wealth.

21 January 2014

I encountered this extraordinary passage in Fawn Brodie's No Man Knows My History: The Life of Joseph Smith. Pushed to his limit by harassment and persecution in Missouri, Joseph Smith was preparing the Mormon settlers for an encounter that promised to be violent. This is how he closed his speech.

"If the people will let us alone," he cried, "we will preach the gospel in peace. But if they come on us to molest us, we will establish our religion by the sword. We will trample down our enemies and make it one gore of blood from the Rocky Mountains to the Atlantic Ocean. I will be to this generation a second Mohammed, whose motto in treating for peace was 'the Alcoran or the Sword.' So shall it eventually be with us - ' Joseph Smith or the Sword.'"

Total Entrepreneurial Activity (TEA) is measured in this graph as the percentage of people 18 to 64 who are either involved in nascent entrepreneurial activity or owner / manager of a new business enterprise. This graph compares TEA across countries and time. (Data and graph from GEM.)

We seem to be at the point of measuring entrepreneurship that we were at in measuring GDP and unemployment in the wake of the Great Depression. It will take some time for policy-makers to realize that it deserves study for similar reasons: it is this variable towards which policy should be directed as a measure of economic health, the degree to which the economy is realizing its potential.

I wonder how long it'll be before something akin to the Green Party - but a movement focused on nurturing entrepreneurship - springs up across various countries. We already have labor and capital parities. Why not a political party that focuses on our generation's limit to progress?

16 January 2014

The Ngram viewer lets users graph the use of words in published books over time.

After vying with "University" for top spot, "Manufacture" passed it about 1830, and held the lead until 1950. It's hard to tell what happens next but simple extrapolation suggests that it will next be eclipsed by "Entrepreneurs." And soon.

15 January 2014

In Alan Greenspan's new book, The Map and the Territory, he reports a relationship between increase in equity values (stock, bonds and homes) and GDP.

He writes, "I find that between 1970 and 2012, a 10 percent increase in market value of holdings of U.S. residents of stocks, bonds, homeowners' equity, and other assets is associated with an annual change in real GDP of 1.3 percentage points." In other words, when net worth goes up 10%, GDP the following year rises by an additional 1.3 percentage points.

I'm not sure by how much total householdequity rose, but the S&P 500 went up more than 26%. Home prices went up by more than 10% in many cities, which - depending on leverage - could easily mean an increase in household equity of 20%. Bonds didn't do as well as either stocks or homes but it seems safe to assume that household equity rose by at least 10%, perhaps more than 20%.

So, if Greenspan is right, last year's gains will mean a boost to 2014 GDP of 1 to 2.5 percentage points. That would mean GDP growth of 4 to 5.5%. With 3% growth, GDP would rise half a trillion; with a 5.5% rise, GDP would rise by nearly a trillion.

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The math?
Annual GDP was about $16.9 trillion as measured through the third quarter, and will likely be measured at $17.2 trillion by year end. 3% of that translates into $516 billion in additional economic growth for 2014. 5.5% of that would mean $946 billion, or nearly a trillion dollars.

The caveat?
And of course Greenspan would caution that there are a host of other factors that will determine GDP growth and those could easily mitigate (or even - as hard as it is to believe - amplify) the effect of gains in household wealth on GDP.

14 January 2014

An aging population is making the labor market worse on two counts. First, there are simply fewer Americans under 65. Second, the housing industry is suffering as population growth slows and demand for new houses slows with it.

First, if all we looked at was retail sales from 2000 through 2013, it would seem as if the economy as largely recovered.

New house sales, though, tell a very different story. That market is still far off its previous plateau.

It might be simple to blame the mortgage market for first providing too much financing and then not enough, causing a slump in construction, but demographics might actually better explain this. Older people are less likely to buy new homes than are new families and the under-65 population is dropping.

This doesn't just indirectly impact job creation by gutting an important industry like housing. As the population ages, the percentage of Americans working is dropping. Every month about 200,000 baby boomers are retiring.

Still, something fundamental is changing in our ability to create jobs. It seems that our ability to automate is outstripping our ability to innovate, our ability to reduce costs by laying off people is more advanced and systematic than our ability to create jobs as we create new products, industries, and businesses.

But meanwhile, demographics may well be eroding demand for new houses and taking away one of the more obvious industries for creating jobs in a recovery. This, it seems to me, is just one more reason to get serious about popularizing entrepreneurship, about making it a policy to systematically create entrepreneurs in this century the same way that we began to systematically produce knowledge workers in the last. As our population ages its even more important that a large percentage of our working age population has jobs.

12 January 2014

Sat down on the plane Friday beside a guy who was heading to a genomics conference in San Diego. We chatted a while. Then I said, "Did you see what happened to the unemployment rate last month?"

"No. I don't look at it. It doesn't include under-employed people."

"That's right," I said. "That's the underemployment number and it has a different value."

"Oh," he said. And like that he made it clear that he didn't want to talk any more.

I've seen this more than once when people encounter facts that would force them to reconsider their theories or beliefs about the world. Rather than revise a belief that defines them, they dismiss the facts as being manipulated or fake or inadequate representations of reality.

As David Bryne of the Talking Heads wrote,

"Facts all come with a point of view. Facts don't do what I want them to. Facts just twist the truth around."

11 January 2014

Channel surfing in a hotel with below zero weather outside, it boggled my mind how many detective, cop, and prosecutor shows are on. Law enforcement is its own genre, more popular it seems than sitcoms or romances.

But of course the law gets defined by someone else, not by cops or prosecutors. You go to jail longer for possession of crack than cocaine? That's because legislators decided that the drug of poor black women was more dangerous than the drug of rich white men, not because the drugs are particularly different. Why is the argument and the machinations behind that law - and dozens of other laws - not the subject of a TV show? Wouldn't the personalities, the cultural biases, the at turns apathetic and angry public calling or writing be the fodder for a great number of interesting shows? And why not have some good guy legislators who - like the sheriff in a small western town bringing order to chaos - ride into town and successfully change Congress? Cleans it up? Wouldn't that be a heart warming fantasy?

Law Creation seems so much more interesting than Law Enforcement. Laws on Order. I'd I'd stop channel surfing to watch that show.

This week in a little burg in northern Michigan, I was running short of time and wanted to grab breakfast. All I saw were fast food options and while eating a breakfast sandwich I saw this poster before me. Moist flesh, glistening, warm, and begging for the touch of your lips. It's food porn, I thought. And given the ads, the abundance in our stores, the fabulous variety of choices in restaurants, delis, and grocery stores, we're overstimulated and too often aroused by the promise of sensual delight.

Maybe it's time to rate food ads in an attempt to make obsession with food a private thing. We could let a ratings board rate ads G, PG, R, or X depending on how healthy is the food they advertise.

Then, of course, guys would stay up late to surf the internet, looking at pictures of food porn and then sneaking out to drive-thru windows. And then there would only be cars ads left to fund sporting events.

07 January 2014

It seems to me that when it comes to economics, good political leadership is part photo bombing and part policy. This could bode well for women aspiring to leadership roles, women who may well have the examples of Fed Chair and President.

Photobombing History

Sir Richard Branson has declared 2014 to be the Year of the Entrepreneur. I like that because it is one more step towards making entrepreneurship the focus of community and policy makers.

Regular readers of R World know that my book The Fourth Economy argues that we're living into an economy that will be transformed and defined by the popularization of entrepreneurship just as the last century's Information Economy was defined and transformed by the popularization of knowledge work.

To the extent that Sir Branson and laborer Davison are right, and we prove to be living during an inflection point of economic history, a time when the rate of entrepreneurial activity accelerates, any leaders in power during the next few years will essentially photo bomb good history, made to look better by association with the great results of this long boom of the early 21st century.

And then there is policy, which brings us to the potential 2017 team of Janet Yellen and Hillary Clinton

Good Policy

Janet Yellen is the first person to become Federal Reserve Chairwoman, which means she could be there to welcome Hillary Clinton to her role as the country's first female president. There are many reasons to like her. She has proven her ability to understand trends; for instance, she warned of problems in the mortgage loan market before the Big Recession. She is more focused on real unemployment than potential inflation. And her philosophy is aligned enough with Bernanke's that when she takes over on 1 February it is likely to be smooth, which should calm rather than startle financial markets.

Her monetary policy coupled with a few reforms to financial markets (that were barely eked out of Congress) should create healthy conditions for investment that funds economic expansion rather than undermine it with risk.

Assuming that (Hillary) Clinton's policies are a more evolved form of (Bill) Clinton's, and that Yellen's policies are able to help a boom rather than reverse a collapse (as Bernanke's policies had to do), it's more than plausible that they will help rather than hinder what promises to be a long boom. If so, Yellen and Clinton could become associated with one of the best economies in history.

So, whether they're merely photobombing an economy poised to emerge or helping to create it, this team might do as much to legitimize women in leadership positions as any women in [well, American at least] history.

Of course as the father of a daughter I know could do the job of any man (and as it now stands is likely to make 73% of a comparable man), I may be standing up to cheer too quickly. Neither is yet in office and the boom has yet to look like much other than a weak recovery.

Still, how fun is it to make a prediction for the next decade that would suggest that roughly 100 years after women got the right to vote, they got it right when they're given a chance to lead?

06 January 2014

"The human infant enters the world without information about what is edible and what is not," wrote psychologist Paul Rozin, who studied disgust for many years at the University of Pennsylvania. Until kids are around two, you can get them to try pretty much anything, and Rozin did. In one memorable study, he tallied the percentage of children aged sixteen to twenty-nine months who ate or tasted the following items presented to them on a plate: fish eggs (60 percent), dish soap (79 percent), cookies topped with ketchup (94 percent), a dead (sterilized) grasshopper (30 percent), and artfully coiled peanut butter scented with Limburger cheese and presented as "dog-doo" (55 percent). The lowest-ranked item, at 15 percent acceptance, was a human hair.

01 January 2014

Before his invasion of Iraq, Bush was working to enroll
world leaders. Here, Kurt Eichenwald
reports on a phone conversation between President Bush and French President
Jacques Chirac in his book, 500 Days.

Bush wasn’t listening to him, Chirac thought. Instead, he
was jumping all over the rhetorical map in search of the magic words that would
win him over. Saddam was lying; the UN had to prove itself; the allies had to
work together. Perhaps, but all beside the point if illegal armaments weren’t
found. What if, in fact, Saddam was telling the truth? …Bush veered in another direction.“Jacques,” he said, “you and I share a common faith. You’re
Roman Catholic, I’m Methodist, but we are both Christians committed to the
teachings of the Bible. We share one common Lord.”Chirac said nothing. He didn’t know where Bush was going
with this.“Gog and Magog are at work in the Middle East,” Bush said. “Biblical
prophecies are being fulfilled.”Gog and Magog? What
was that?“This confrontation,” Bush said, “is willed by God, who
wants to use this conflict to erase His people’s enemies before a new age
begins.”